Court Strikes Down Obamacare Exchange Subsidies; Proving That The Secret To Good Legislation Is KISS

An interesting decision from the US Court of Appeals for DC today, striking down the ability of the Feds to provide health insurance subsidies to many who have enrolled through the new exchanges. This will, of course, get appealed (the next two, and final two, stages possible are to the full DC appeals court sitting with all judges instead of just 3 and then the Supremes themselves) but which way it's going to go is obviously as yet unknown. The basic problem is that the law was so badly written that it does, in the opinion of the Appeals Court for DC at least, actually ban the Feds from offering subsidies to those who enroll for health care insurance through the Federal exchanges.

In a potentially lethal blow to Obamacare, a federal appeals court has ruled that the federal government may not subsidize health insurance plans bought by people in states that decided not to set up their own marketplaces under Obamacare.

The law clearly says that states are to set up the exchanges. But 34 states opted not to, and the federal government took over in those states. The court ruled that the federal government may not pay subsidies for insurance plans in those states.

If people don't get subsidies then that health care insurance in the individual market becomes too expensive for many healthy people to bother buying, the average quality of the insurance pool declines as only the ill do buy it and we end up in the insurance death spiral. Which isn't, to put it mildly, anything that anyone really wants to happen.

Of course, it's entirely open to Congress to change this. Simply pass a new law correcting the flaw in the old one. The flaw itself is really very simple indeed, the language was so badly drafted that subsidies can only (according to this new ruling) be offered where States themselves are offering the exchanges. Those who are in the Healthcare.gov federally run one can't get them. It's an almost trivial change in the law necessary to fix this. Except, of course, that getting any change at all in the ACA through the current Congress just isn't going to happen.

The larger economic and public policy point is that complex and complicated legislation (and all complex and complicated economic and political plans) ends up with problems like this. I, being English, would call the ACA a Heath Robinson machine, you as Americans probably a Rube Goldberg one. Simply a ghastly (that is an opinion of course) and far too complex scheme to ever be able to work properly. There's simply too many moving bits and the whole system depends upon them all working together and properly. And as we're seeing here there's conflicts built into the very law itself.

There's a number of critics of the ACA (Mike Munger for example) who point out that this complexity means that the new system is actually worse (*even* worse that is) than if we'd simply moved to a single payer system in the first place. Or moved to a more market orientated system as some proposed. The simplest solution might actually have been to just remove the tax deductibility of health care insurance and thus stop it being part of employment contracts (it only ever became that way as a result of corporations trying to dodge wage controls during and after WWII anyway). Others (myself included) argued that moving to a system of health care accounts and a market for catastrophic insurance, possibly with an expansion of Medicaid (and thus being like the Singapore system ,a truly excellent and cheap one) would have worked best. After all, all three of those things already existed and only needed minor tweaks to become vastly more popular.

But the point is that all or any of these would have been much simpler than the extreme mess that the ACA became once all of the various interest groups had been appeased. And thus that advice about good legislation: Keep It Simple, Stupid. Any of those three simpler solutions would have been better than what exists now.

Oh, and perhaps a tiny piece of advice for legislators: try to read and understand the legislation you're voting on? Possibly even make sure that it is consistent with itself?